ing full time to investigation, devising control measures, training claims takers, etc.

The Federal authorities also believe that each State should have a positive program to keep fraud at an inconsequential minimum, and that the first step in fraud prevention is to use proper claims procedures. These procedures include requirements for claimant reporting; adequate explanation to claimants of eligibility conditions; the use of separation information and information concerning failures to respond to call-ins or to accept referrals or jobs through the employment services; adequate fact-finding when claims issues arise; the use of claimant questionnaires and special claimant interviews. Sound basic procedures, adequate supervision, and intensive training are important in these operations, and the more effective the results, the less will be the need for the extensive use of special methods to prevent and detect fraud.

Several specific methods to improve procedures have been used in some States, and the Bureau of Employment Security recommends their use in other States :

1. Refusal to take continued claims during the noon hours when ·mployed claimants could most easily visit the local office. 2. Rotation of the time for claimants' reporting. 3. Rotation of claims takers' stations. 4. Particular attention to claimants who delay filing initial claims for a considerable period after they lose their employment, to claimints who often fail to report at their scheduled appointments, and o claimants who leave the office without waiting a reasonable time or adjustment or other special interviews. Substitutes for the social ecurity account number card should never be accepted when claims re filed, and the verification of the signature on continued claims hould be a required practice.

Three other techniques have been used effectively by some States, ut their results must be constantly checked since considerable costs re involved:

1. Accession notices have been used in Connecticut and Maryland rith considerable success. Workers know that, when they are hired, heir employer must send an accession notice to the employment office. his requirement tends to prevent fraud; it also permits the State gency to catch some fraudulent claims before payments actually egin. The system would be much more effective if all employers rere required to file such notices and not just covered employers.

2. In a larger number of States a check of employee wage reports s made to find persons who might have drawn wages at the same ime they were receiving benefits. This check can be done rather imply by mechanical means, and cases of apparent discrepancies can e individually investigated. The check can be made against old-age nd survivors insurance records if a State keeps no wage reports.

3. Special industrial surveys can be made by field workers or merely y telephone. Fraud seems to concentrate in certain spots in certain ccupations. Interstate claims may become especially troublesome. 'articular attention to these troubled areas may yield greater results van would any system of over-all investigation.



There are important advantages in a national system of unemployment insurance. These advantages lead some members of the Council to prefer a national plan to the present State-Federal system. Indeed, these members of the Council believe that experience under a State-Federal plan will ultimately compel a shift to a national plan. Four of the members of the Council who prefer a national plan of unemployment compensation believe, however, that the existing StateFederal plan should be immediately improved. They have therefore signed the recommendations of the Council, believing that these recommendations, if adopted, would not impose any obstacles to a later shift to a national plan. Mr. Rieve concurs in this minority dissent but is not signing the recommendations of the Council since he disagrees with some of the most important ones. His views are explained in a concurring dissent at the end of this appendix.

The members of the Council who prefer a national plan but who have signed the report believe that the report should contain a statement of the reasons for their preference for a national plan. They believe the following are the principal reasons for preferring a national plan.


The fundamental fallacy in the present structure of unemployment insurance and the employment service in this country is that it is premised upon the theoretical considerations of State-by-State poÎitical organization rather than upon the realities of our national economic organization. Employment, unemployment, prices, profits

. and taxes are largely determined by Nation-wide influences. Employment or unemployment in the automobile industry in Michigan or in the steel industry in Pennsylvania or the coal industry in West Virginia is not the result of conditions or policies arising within the particular State. Why then should the contribution rate, benefit amounts, and other essential factors be varied on a State basis!

The argument is made by those advocating a State system that the determination of the existence of unemployment is an individual and local matter. This statement is true, but such a determination can and should be made on the basis of standards applicable throughout the country. The experience gained through the operation of the Federal old-age and survivors insurance program indicates that local and personalized administration can be achieved under a Federal law and uniform Federal standards.

The most apparent inconsistency in the administration of the present program is the fact that while there are numerous local labor markets which cross State lines, the local offices for unemployment insurance and employment service are organized and operated in accordance with the fortuitous State boundaries. Although various techniques have been tried to assure a more effective operation in labormarket areas crossing State lines, the effort has been largely ineffective because of the natural insistence of governors, State legislatures, and State and local directors to think in terms of State sovereignty and responsibility.

There are nearly 50 natural labor-market areas in the United States which cut across State lines. In these areas the number of individuals in the labor force represent a substantial proportion of the total labor force of the entire country. Among the outstanding examples of markets which cross State lines are the following: St. Louis, Mo., and East St. Louis, Ill.; Kansas City, Mo., and Kansas City, Kans.; Philadelphia, Pa., and Camden, N. J.; Duluth, Minn., and Superior, Wis.; Washington, D. C., and adjacent Maryland and Virginia; New York City and adjacent Connecticut and New Jersey. Only a service organized and administered day-by-day on the principle of a Nationwide service can break down the psychological and political separatism which now permeates the system.


DISCRIMINATION AMONG EMPLOYERS Under the existing State-by-State systems, employers are required to submit different forms, comply with different procedures, and pay different contribution rates in accordance with varying State laws. An employer operating on a Nation-wide basis is required to submit quarterly wage reports on individual employees in some States but must submit separation reports on individual employees in others. The forms for many reports differ among the States.

Some progress has been made in the States, under the pressure of action for a Federal system, to simplify the forms and eliminate the haphazard variations which still exist. However, in view of the fact that the Federal Government already collects wage reports from employers for the Federal old-age and survivors insurance program, the cost of administration could be greatly reduced and employers relieved of part of the present bookkeeping burden and inequities by utilizing one report to the Federal Government for all social-insurance contri

There is no uniform definition of the terms "employment" or "employee" under the State laws nor even a uniform interpretation among those States which have identical provisions. The result is that employers are sometimes required, without sound justification, to comply with several different State laws. Nation-wide employers who have isolated representatives in many different States have a legitimate complaint about the unnecessary burden which is placed upon them by the necessity of complying with a multiplicity of varying State laws and varying reporting requirements.



Under the existing State-by-State system, the amount and duration of benefits as well as most other conditions relating to eligibility and disqualification for benefits are determined exclusively by State law and State interpretation. Although in Nation-wide industries—such as automobiles, steel, coal; shipping, and textiles-wages, hours, and working conditions, as well as prices, are determined on a Nation-wide basis, unemployment insurance benefits are determined on a State-byState basis. Thus, though two individuals receive the same wages and work the same period in the aircraft industry, for example, one, if he had worked in the State of Washington upon becoming unemployed could be eligible to receive $25 per week for 26 weeks or a total of $650; while the other, if he had worked in the State of Arizona could receive $20 per week for 12 weeks or $240.

The discrimination which also exists in such matters as eligibility conditions, waiting period, disqualification provisions, determination of suitable work, minimum amounts, appeals procedures, methods of computing the average wage of the unemployed individual, and other factors is very marked.

The case for a Federal system of unemployment insurance and employment service offices does not rest entirely on the inadequacies, discriminations, and inequities of the present State-by-State system. There is no doubt that much could be done to improve the present Stateby-State system if greater authority were given to the Federal Government to set minimum standards. But even with such authority the present system would be inappropriate to deal with the employment and unemployment problem on a national basis in accordance with the economic and social requirements of our economy.


The variations in benefits and contributions mentioned previously are discriminatory as between individuals. No principle of equity or justice can be advanced for such variations. In addition, such variations are a hindrance to developing a Nation-wide policy designed to assure maximum employment and productivity. States with low benefits and high reserves and restrictive disqualifying requirements may be adhering to policies which thwart national policy. In brief, there is no assurance that the State programs based on State laws and State regulations will reinforce national policy aimed at meeting the needs of a national economy. Since most State legislatures meet biennially, they are often unable to make the necessary changes promptly to adjust to a national emergency involving millions of our citizens. In fact

, during the war and the reconversion period policies of particular States were frequently out of accord with rapidly changing national needs.

Under a State-by-State system, the total amount of reserves must necessarily be greater than under a single Federal system. In order to safeguard each State program separately, there must be accumulated reserves which for all the States together must aggregate a far larger amount than that equally safe for a single Federal system. There is therefore, under a State system need to levy higher contributions and build up reserves larger than would be necessary under a Federal plan

Instead of the present $7,000,000,000 of reserves isolated in water-tight compartments under the State-by-State system, not more than $2,000,000,000 to $3,000,000,000 of reserves would be necessary under a Federal system. The comparable advantages of centralized reserves in our banking system have been recognized for 35 years.


One of the major defects of the State-by-State system is that, even when uniform terms and provisions are included in State laws, there is lack of uniformity in the interpretation and application of such uniform decisions. Thus, the various State agencies and the courts have rendered dissimilar decisions on such important matters affecting the benefit rights of employees as who is an "employee,” what is “suitable work," "voluntary leaving," "stoppage” of work, "available for work," and "good cause" for refusing suitable work. No basic improvement can be made in this situation without materially increasing the authority of the Federal Government. Only a Federal system can provide for a uniform and equitable interpretation of uniform statutory provisions.


A valuable element in the American economic system is the incentive given to the maximum utilization of individual skills in the changing need for labor. As new plants are built in new communities, new labor is required which must be drawn from other communities. This situation permits individuals to climb the economic ladder to utilize their greater skills, earn higher cash rewards, and thereby to increase national production and consumption. The various eligibility conditions of the State laws and the restrictive interpretations given of “voluntarily leaving” work, and the heavy penalties placed on “voluntary leaving” when not "attributable to the employer," all act as bars to the effective geographic and economic mobility of labor. A typical case illustrates the way in which this barrier works. An individual “voluntarily leaves" his employer to take a better paying job at a higher skill. After he works for a short period of time for his new employer, the plant burns down, the employer goes bankrupt or, for some other reason, the employee becomes unemployed due to no fault of his own. Under nearly half of the State laws this involuntarily unemployed individual will be denied benefits during all or part of this period of unemployment.

Another facet of this same problem is the unwillingness of a State legislature to increase the benefits under its law because of the competitive disadvantage which the employers in the State will face as against employers in other States with lower benefits and lower employer contributions. The recommendations in the body of the report will result in considerable improvement in this situation but will not entirely eliminate it. The only way in which unemployment insurance benefits can come to have a neutral effect on labor mobility is hy providing a uniform national system with eligibility, amount and duration of benefits, disqualifications, and related matters on a cominon basis throughout the Nation.


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